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If Power Corrupts, Businesses Cannot Afford to Give Too Much to Too Few

The human race is not very good at learning from its mistakes. If it were, we might have stopped handing too much power to too few people long ago.

The oft-trotted out quotation about power and corruption is that from Victorian-era historian Lord Acton, who wrote: “Power tends to corrupt, and absolute power corrupts absolutely.” But he was only echoing what 18th century British PM William Pitt had already said when he announced: “Unlimited power corrupts the possessor.”

And both of those erudite figures were several ages behind Roman historian and thinker Tacitus, who cast the issue from the opposite angle – “The more corrupt the state, the more numerous the laws.”

In the modern era, much work has been done to investigate the sociological and psychological links between power and corruption. The infamous Stanford Prison experiment served as a stark illustration of how, when handed arbitrary power over other people, the human psyche retains a primitive tendency towards cruelty and amorality.

More recent investigations have tended to confirm that, when people know or think they can get away with something unethical or at least ‘anti-social’, they will be more likely to try it. And does this not sum up how power tips over into corruption – how, once it reaches beyond a certain point, the exercise of control starts to make you immune to accountability?

Why businesses need accountability

This is a bad idea for businesses. Accountability, to your employees, to your clients, to your customers, to your creditors and stakeholders, is a good thing. It reminds us that no business exists solely for the benefit of the very few. Even the sole trader and the entrepreneurial bedroom start-up have responsibilities to their customers. If the owner-operators gets too drunk on the power of their own self-determination and start making decisions purely for their own convenience, the likelihood is they won’t have much of a business for very long.

At the opposite end of the enterprise scale, we recently had a salutary and sobering lesson in the perils of too much power (and therefore too little accountability) in business in the form of the Carillion collapse. The withering summary into why the construction giant, which controlled billions of pounds worth of public contracts, ended up going to the wall was that bosses were “too busy stuffing their mouths with gold.”

In the case of Carillion, the corporate power of its board of directors led to atrocious financial mismanagement and self-serving decision making that prioritised personal wealth above all else. With accounting giant and long-term auditor KPMG failing to ring any alarm bells over what must have been glaring holes in the books, apparently because it was too scared to lose such a massive contract, Carillion bosses were allowed to play that game beloved of infants and very powerful, wealthy individuals the world over – invent your own reality, a world where whatever you say is taken as truth.

Except, in business, the fake news has a nasty habit of being exposed in the end. In Carillion’s case, reality bit back in the form of a gaping pensions deficit and an inability to pay billions owed to suppliers.

Business operates according to complex ecosystems. When individuals accumulate so much power that people stop reminding them that they are still subject to the same rules of engagement as everyone else, it is rarely going to end well.